Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers / Commodities / Gold & Silver 2020

Mike Gleason: It is my privilege now to welcome inCraig Hemke of the TF Metals Report. Craig is a well-known name inthe metals industry and runs one of the most highly respected websites in ourspace and provides some of the best analysis you will find anywhere on bankingschemes, global macroeconomics, and evidence of manipulation in the gold and silver markets.

Happy New Year to you, Craig. Thanks for coming on and welcome,how are you?

Craig Hemke: Mike, it's always a pleasure. New Year's started off witha bang, man. I hope it's not indicative of how crazy this entire year is goingto be. We'll see.

Mike Gleason: Yeah, certainly this week sparkingaction itself. Lots going on both geopolitically and in the markets, and we'llget to a lot of that. Well, Craig, here we are entering another new year. Theconflict with Iran and the potential for an escalation there spurred some safehaven buying in recent days, but the rally in metals started last month. I'dlike to open by getting your thoughts on what you believe will be drivingmetals prices this year. Yes, we expect the forces of evil to continue doingtheir best to manage prices, and we'll get to that topic of price manipulationin a moment, but talk about what you're seeing in the metals here recently anddiscuss some of the themes you anticipate people will be talking about thisyear when it comes to the metals.

Craig Hemke: Well, I think it's critical that people try to have alonger memory than 48 hours. As we record this today, I'm seeing all kinds ofgarbage. I saw garbage from some group that is always a perma-bear, alwaystalking about how gold has toppedout and going down, has a clear agenda, just like some of the short sellers thatare always anonymously pound the mining stocks with fake research reports andstuff like that. And I'm seeing these things today about how, "Oh yeah,gold, look at that. Look how terrible that candle looks on the daily chart, andhow come hold's not going up when all this war stuff," and it's like, doyou not understand? I mean, gold went up prior to the war starting. Beginninglast Thursday, gold closed on the Comex, last Thursday, January the 1st atabout $15.30. So, the whole move from $1,530 to $1,580 was war premium, if youwill, really short-term war premium. Then the spike to $1,610 was when weseemed to be on the verge of what could even have been a nuclear war in theMiddle East.

The fact that it's pulled back to $1,550 shouldn't surpriseanybody. I mean, we hadn't even worked out all the war premium yet. Despitewhat is some pretty cheery economic news this week, service sector PMIs, theADP jobs report, that kind of thing, so jeez-Louise, I sure hope people keeptheir perspective. You are correct in pointing out, Mike, that the metalsrallied strongly into the year and it had nothing to do with war. That wasn'ton anybody's mind prior to about six o'clock in the evening on January the 2nd.Gold rallied 3% from December the 20th through that date. Silver rallied 8.5%from December 9th at $16.60 up to $18.40 on January the 2nd. The HUI, the goldbugs index ... which everybody's freaking out because the shares went downyesterday. The HUI is up 15% still since the middle of October. For a while itwas up 20, and why is this happening? Because the Fed, whether they want tocall it QE or not, began this direct monetization of the debt program inOctober.

Everything's going up. Stock market, you name it, and that isgoing to continue this year. It's only going to get worse. A lot of peoplemissed last Friday, the 3rd, the minutes for the December Fed meeting werereleased. First of all, everybody was on vacation still on Friday, January the3rd, and second of all, those are always released on a Wednesday, three weeksafter the Fed meeting. So, no one's looking for them on a Friday afternoon attwo o'clock, but here they came. And buried within the minutes, anybody canpull these up, is admission that what's very likely to happen in the monthsahead is the Fed will start monetizing not just T-bills, but notes, longer termduration notes, two years, three years, five years, seven years, ten years.There's no other option. They cannot afford the stock market to go down. Theycannot afford the money supply to contract, and thus they will constantly beprinting all through this year more and more dollars, and everything is goingto go up for the reasons that were driving them last year. Please don't getcaught up in what happened and how the chart looks based on theseextraordinarily rare events that we saw back on Tuesday.

Mike Gleason: There's been a bit of a pattern inrecent years where the metals start perking up in December and perform well inthe first half of the year. Any thoughts about what's behind that and are youlooking for that pattern to repeat this year, Craig?

Craig Hemke: Yeah. We were talking about it on my site all the waythrough December. It was logical to expect, first in November, you expected themetals to trade lower because the December contract is always the most heavilytraded all year long. And the December contracts, both gold and silver, hadmassive open interest and they were both going off the board at the end ofNovember, which meant all the speculators that were long were going to have tosell, and if they don't completely roll over their positions into February,then that effect is a selling pressure. The price went down.

I told people all through November, I thought, $1,440, that'dabout do it. We're already so extremely oversold. I couldn't see a waterfalldown. I think we saw $1,445. I thought we'd rally into the end of the yearbecause as you said, Mike, that's typically been the pattern, especially sincethe bear market lows were put in back in 2015. The shares performed well,especially in the back half of December, because they're subject to so much taxloss selling, particularly in Canada, and that usually concludes around 18th,20th. People want to get that done before they go on Christmas holiday. And soonce again, we got that behind us and up with the metals. Let me just pointthis out to you, Mike, because this is a lot like last year. You remember lastyear, the stock market crashed. Remember that in December of 2018?

Mike Gleason: Sure. Worst December in decades.

Craig Hemke: Yeah, it was crashing, and basically the stock market wascatching down to the contraction of the money supply that the Fed was doing bytrying to "normalize", whatever that means, their balance sheet, andthe stock market finally caught on to that disappearance of liquidity. And so,what happened? On Christmas Eve, (Treasury Secretary Steven) Mnuchin… andanybody can look it up, I'm not making this stuff up… Mnuchin called a meetingof what's called the Plunge Protection Team, the President's Working Group onFinancial Markets. They came up with a strategy to float it back higher. Theday after Christmas, after the holiday, the Dow went up a thousand points andnever looked back. Now, this was when gold first started to move higher, was inDecember last year, because interest rates had peaked in November, and this iswhat all caused me to issue a forecasting saying '19 was going to be the bestyear for the metal since 2010. Well, why? Because the Fed was going to bereversing course and they were going to be printing cash because they don'thave any choice but to liquefy and continue to liquefy all these markets.

They can't have deflation. They can't have crashing stockmarkets. They can't have higher interest rates, none of that stuff. So, inDecember of 2018, gold starts to rally, and everywhere everybody's like,"Well, this is just a safe haven deal. Gold's going to $1,100 in2019," and all this crap, Harry Dent stuff. Anyway, that's not whathappened. It wasn't what was going to happen. It's not what did happen, and sonow here we are, gold rallying again, anticipating what's going to be happeningthis year and it's the same thing. "Well, the only reason gold went up isbecause of the safe haven stuff," as if gold rallying in December and theshares railings since October had something to do with the idea that the U.S.was going to whack this Soleimani character on January the 2nd. It didn't haveanything you do with that. Gold is simply looking ahead, looking over thehorizon as it always does, sees all this liquidity coming from the centralbanks around the world because it can't afford to do anything else and it'smoving higher, and people need to understand that and they need to plan forthat as they make their investment allocations for 2020.

Mike Gleason: Now let's talk about pricemanipulation. Nobody does a better job than you when it comes to covering whatthe crooked bankers are up to in the paper markets for gold and silver. Theysold a boatload of futures contracts last year in both metals. You observedthat open interest in gold was up a whopping 70%. Said another way, the supplyof paper gold rose by 70%. Yet the amount of gold in the vaults backing thatpaper barely budged. It's quite the racket. So, while gold itself is actuallyscarce and hard to produce, futures contracts are exactly the opposite. Thesupply is essentially unlimited. Last year, 33 million new ounces of paper goldwere dumped into the market. Despite that, gold prices still managed to rise by18% or so. So, what do you make of that?

Craig Hemke: Yeah, I mean, how the world, and I guess, I don't know,too many people get their beaks dipped in this or just simply don't care, buthow the world allows, how the mining companies allow their product to bepriced, not off of the exchange of the actual commodity, but off the exchangeof these derivative contracts that have nothing to do with anything. It's likeI look at you and I say, "Mike, here. We'll call this contract between youand I gold, and I promise at some point that I got the gold behind it and ifyou want it, I'll deliver it to you," and then you promise that you'reactually interested in it and you go borrow a bunch of money from yourbroker-dealer to buy it on margin, and then we just pretend that that contractis actually ... there's going to be some physical exchange between us at somepoint, but that never happens, and at the end of the day you just say,"Well, I liked my exposure," and I sell my contract. You sell yourcontract and I, taking the other side of it, buy it back, and there was neverany gold exchange at all. There was just some weird promise that there was abacking to it and it's a trading of those things that is allowed to determineprices. It's just ridiculous.

Yeah. Let's backtrack to that open interest thing that you said,because here's a great way to look at it. Everybody knows, or at least shouldknow, that 2018 was the largest year of global central bank gold purchasessince 1969, the year after the London Gold Pool, 651 metric tons. Projectionsare, run rates, I haven't seen the actual final numbers yet, but theprojections are the 2019 was even greater, probably about 670 metric tons. So,there is what, 25% of global mine output actually demanded, I guess, as far aswe can tell, physically delivered to the central bank – 670 metric tons ofphysical demand, offset by, as you said, the creation of over 1,000 metric tonsof digital pretend paper, gold contracts. It's like a two headed monster. Imean you've got the actual physical product, which as you said, is scarce,being priced by the trading of derivatives, which can be created infinitelybecause no one ever calls any of these people to the carpet. So it'sridiculous. It's outlandish.

Yes, gold managed to rise 18% last year, even while the supplyof derivative contracts increased by 73%. Imagine if there was some forcedlinkage between the ability to create contracts and the amount of actual goldon deposit in the vaults, and you couldn't have increased it by 73%. What ifthe supply only increased by 10%? Well then all that money around the planetlooking for gold exposure would have had to find it through acquisition ofexisting contracts. This is how the stock market that allegedly works, butthat's not how it works in the pricing of precious metals. The banks justcreate more contracts, taking the opposite side, taking the short side, andfiguring they can out last the speculators, eventually maybe forced them outand cover their shorts. It's disgusting, and again, at the end of the day, what'sreally astonishing are these dopey rock breaking geologist CEOs of the miningcompanies that think it's a valid pricing structure and they fall for it.That's what's really mind blowing.

Mike Gleason: I want to ask you about thepossibility of whether or not the bullion banks will lose control of pricesanytime soon. That 70% jump in open interest is extraordinary. The departmentof justice is prosecuting several people and they have secured some guiltypleas. It's interesting that they are using RICO laws. Perhaps they actuallysee the bank activity for what it truly is, organized crime. Officials inLondon are asking some pointed questions about the fraudulent use of EFPs,exchange for physical. An optimist would say that some of these developmentswill lead to reforms, but I think we've all learned that you should neveroverestimate bureaucrats' ability or willingness to do the right thing. We mayhave to wait for the market to solve the problem, which will happen right afterconfidence in the futures markets, the banks, and/or the dollar collapses. Whatare your thoughts about how much longer this crooked price discovery systemwill persist, Craig?

Craig Hemke: Well, Mike, you've said a mouthful there. Let me pick offa couple of things. You mentioned the regulatory agencies. You got the Ricoinvestigations here in the U.S. It's pervasive. The fraud is pervasive. Theformer head of JP Morgan's precious metals desk, who is also on the board ofthe London bullion marketing association, the LBMA – why would he be on both?Why would he be a JPM trader and on the board at the LBMA? But anyway, he's nowbeen indicted. The RICO statutes allow you to not just go after the goon, butallow you to go after the Don. So, we'll see how far it reaches, however, itdoes reach across the pond. My friend Andy McGuire has been telling me this nowfor over a year, that the FCA, which is the English/British equivalent of theSEC, I guess, or Department of Justice, whatever, has been looking into therisks that are being taken by the English banks, and what that might pose thesystem.

Andy has told me about a meeting he had with a couple of Membersof Parliament, and this guy, Andrew Bailey, who at the time was the head of theFCA. This was back in maybe August, and this Bailey had no idea, because theLBMA’s so opaque. I mean, you don't get these stats every day, all theunallocated gold and all this stuff, and the risk that the bullion banks aretaking there. So Andy laid it out for him and he said, this guy's jaw dropped,and he's like, "Look, we can't afford a second financial crisis off ofthis. I mean the people ... we already shafted them once. They'll never let usget away with it again. We have to put a stop to this somehow," and Andytold him about the EFPs, and we'll get to how that continues in a second.

So anyway, this guy Bailey, who according to Andy said we got tosomehow put a stop to this, this guy Bailey was just nominated and confirmed tobe the head of the bank of England by Boris Johnson. So what's he going to do?Does the buck stop when he leaves there, leaves the FCA and now he's got to bea servant to the bank of England and stop paying attention? Or maybe he's goingto call the banks on the carpet. I know what direction I think any cynical ornon-cynical person would think that that's going to go, but I digress. TheseEFPs that I've been writing about for a couple of years, this is an arcaneprocess that's a part of every futures market, but I just can't even describethe degrees to which it is abused ... I guess that's the right word ... withingolden silver.

I've kept track of ... I don't even know what it is... over thelast two years, something like 14,000 metric tons of gold contracts. Each Comexgold contract is a hundred ounces, allegedly, of gold. Well, enough contractsthat are the equivalent of 14,000 metric tons had been moved off the Comex andexchanged for physical (EFP) through London. Andy says they have this processwhere they swing them into these 13 day little contracts that are off the booksand just keep rolling them over and over and over trying to kind of hide it andpretend that it's not there, but this process continues. Mike, let me lay thison you. It's just that we've had, as we speak, five trading days in the year2020. In those five trading days, there have already been 67,713 Comexcontracts shifted off of the exchange and exchanged for physical, as they sayagain, in London. 67,000. Mike, again every contract is a hundred ounces.That's 6.7 million ounces. That's 210 metric tons of gold.

The whole Comex vaults only holds 8 million ounces and theyshifted 210 metric tons, 6.7 billion ounces off exchange in just five days?This is the scam of the greatest order, and like I said, again, the amazingthing is that it still exists… that people in 2020, when the world is allinterconnected and everybody knows everything and I can watch missiles take offin Iran five minutes after they're shot just by following Twitter. It's amazingthat this continues. It's just mind boggling that this is allowed to continue.

Mike Gleason: Yeah. Well put, you beat your headagainst the wall trying to figure out when it's going to finally end and whythere's not more talk about it. Well, Craig, before we wrap up, I'd like to getany final thoughts. I know you've got a lot to say here early in the year. Ifyou could give metals investors an idea of what it is that you're going to bewatching most closely, what they should be watching most closely over thesefirst few months of the year, and then maybe a sign that perhaps the powersthat be are losing control, or any other comments you want to make here as wewrap up?

Craig Hemke: Yeah, I don't know, Mike. Since I've been doing this, andI have to admit kind of fallen forward a little bit and getting excited aboutit myself back in 2009 and '10, that kind of thing. This hyperbole of,"The Comex is going to fail." Come on. That'll all happen in a blinkof an eye someday or overnight, but to sit there and ... these people that sayit's going to fail above $22 silver. I mean, come on. We'll see. The banks aregoing to keep it going as long as they possibly can and I don't think anybodycan come up with a time table for it. The only thing it that will end is a runon the banks for physical metal, and this kind of thing gains momentum and itsnowballs and finally that realization of what a scam at all is sinks in andpeople panic to get their hands on actual mental while they can. Again, I can'tstress this enough, ignore the perma-bears with an agenda.

They're trying to talk down the market. They're trying to talkdown the shares, or trying to talk down the individual shares because they havesome massive short position. The Fed is going to continue with the repo crisis.It's not going away. The U.S. is going to have at least a $1.2 trillion deficitevery year this decade. That's what the Congressional Budget Office says. Thatmoney's got to come from somewhere. The central banks cannot afford adeflationary collapse. They will be printing and printing and printing. Even absentthat argument about what that does to the dollar and all this other stuff, thatcash goes someplace, and it goes everywhere. Again, it's not a mistake that theHUI… was up 20% since October 15th… is now up 15%. What happened on October15th? That's when this whole new not-QE debt monetization program kicked in.

Everything's going up. Okay? So everything's going to continueto go up. The banks are going to throw up roadblocks. We've already got 800,000contracts of open interest Comex gold. So, I don't know how far gold will go.$1,650? Maybe if it kind of gets rolling, it can go to $1,750 this year. That'dbe a pretty good year from where we are. Where I think the real interest shouldbe, for people that want to either have some fun, make some trading fiatcurrency that then they can buy more physical metal, that kind of thing ... Imean start looking into whether or not you have exposure to the mining shares,not just the big companies, but the medium juniors and the explorers, that kindof stuff, because as global asset managers, who have all this cash, and they'realways looking for a place to go. Once the GDX, the DDXJ, the HUI begin to makenew highs versus 2016, the floodgates are going to open and money's going tocome pouring into the sector and it all has to pass through a little tinyfunnel because there's only so many places it can go.

It's just simple economics. You get twice the cash chasing thesame handful of stocks, and they're going to go up in price. So, I think it'sgoing to be a very good year again for the metal, just like last year was, andI was right when I predicted it last year. But I think the real outsize gainswill probably be in the shares more than in the physical metal. I wrote thatup. I kind of make an annual forecast every January. I posted it to my site.It's a free link. Maybe I'll send it to you, Mike. You can put it on this page.I always try to come up with a catchy name, so this year's title is 2020Foresight, instead of 2020 hindsight. Kind of clever, huh?

Anyway, 2020 Foresight is what it's called. You can goto my site, or like I said, click the link, if you canput it on this page, and it will just explain to you the basis for why I thinkit's going to be a good year. If you've got time, I think it's worth a read.

Mike Gleason: Yeah, it would be time well spent forsure. I always say, we spend a lot of time looking at your site here in thisoffice. It's money well spent for anybody that wants to get on board therewith TF Metals Report. And before we let you go here, Craig, tell people alittle bit more about your site, how they can get signed up, and maybe someother tidbits they should know.

Craig Hemke: Well really the best thing about my site, I mean I doanalysis every day and we try to keep people locked into the big picture, notthe tick by tick stuff, but the site is... I mean the people that populate itare from all around the world, all different political views, but we realizewe're all in the same boat, and so instead of bickering at each other and namecalling and all that kind of stuff, rule number seven in the communityguidelines is treat others the way you want to be treated. Come on, your mothertaught you that. Why do you think just because it's an anonymous website, youcan be rude and mean like Twitter, things like that. So anyway, the communityitself is what's worth it.

It's only 12 bucks a month. So it's not like I'm getting richoff of it. 40 cents a day to give you access, really keep you on top andgrounded of where we're headed. And again, I just can't emphasize enough. Imean Mike, the old line is a rising tide lifts all boats, right? Think of therising tide being all of the cash. It has to be created from nothing. You mustunderstand, this is direct monetization of the debt by the Fed. Primarydealers, they get the Treasury bills, soon to be Treasury notes from theTreasury. The primary dealers are the ones responsible for making that marketand getting them filled. They buy them themselves, and anybodycan, ZeroHedge has been great about writing this. The Fed then buysthese directly from the primary dealers about 72 hours later. Okay, so there'san intermediary in between, but basically the Fed is buying the Treasury bills,soon to be notes, directly from the Treasury.

How that isn't direct monetization of that? I don't know. Justbecause there's a step in between? So, this is happening, Modern MonetaryTheory, all that stuff that the politicians daydream about, that's coming, andwhether you are going to want to talk about gold standard and system reset andall that kind of stuff, whatever. Yeah, sure. But all of that cash is going tobe sloshing around. Stock market's going to go up, everything. So, gold andsilver are going to go up and the shares are going to be particularlyadvantageous to own in the next few months. And so, again, I just want to keepeverybody grounded and not be thinking about the events of Tuesday, and I meanthat was a real, you want to talk about one off, that was a one off. That washopefully something that you'll never see again in your lifetime. This on thebrink of maybe nuclear war in the Middle East. Ignore the reaction to it, therun up to it and look at the bigger picture and I think you'll see thatphysical gold and silver and maybe some mining shares must be a part of aportfolio in 2020 going forward.

Mike Gleason: Yeah, well put. It's going to be agreat time to kind of focus more in on this if you're not already doing that,and it's going to be an interesting maybe, tumultuous year. Ignore the blips ordon't pay as much attention to them. We do have a trend in place here and Craigand TF Metals Report is a great way to follow that, hopefully righthere on this podcast as well.

Well, very good. Thanks again Craig. Have a great weekend. Iwish you a happy and prosperous New year and we look forward to catching upwith you again soon. Keep up the good work, my friend.

Craig Hemke: All the best, Mike. Go Chiefs!

Mike Gleason: Yeah, good luck to your Chiefs thisweekend. Well, that will do it for this week, thanks again to Craig Hemke. Thesite is TFMetalsReport.com, definitely a fantastic source for all thingsprecious metals and a whole lot more. We urge everyone to check that out if youhaven't already done so for some of the very best commentary and analysis onthe metals markets that you will find anywhere.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Mike Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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